Bowen: Iraq Reconstruction Still a "Mixed Picture"

Interviewee: Stuart Bowen Jr.Interviewer: Lionel Beehner
May 1, 2006

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Three years after the fall of Baghdad, the reconstruction of Iraq is showing mixed results, says Stuart Bowen Jr., who heads the office of the Special Inspector General for Iraq Reconstruction (SIGIR). The latest quarterly SIGIR report points to security concerns, poor oversight, and endemic corruption as some of the main obstacles hobbling reconstruction efforts.

Meanwhile, sabotage has left Iraq's oil and gas sector still performing at sub-prewar levels. A reconstruction gap continues to exist between U.S. expenditures and the delivery of essential services to Iraqis. And SIGIR continues to investigate more than seventy cases of fraud related to reconstruction contracts. Cfr.org spoke with Bowen about the pace and progress of reconstruction in Iraq.

Give me your assessment of U.S. reconstruction efforts in Iraq.

Well, it's a mixed picture, and it has been for a while. But it's also an improving picture on the reconstruction front, speaking in the larger perspective, since the reconstruction program started. And that improvement is tied to a clarified and more direct emphasis on providing reconstruction projects and programs that can be executed more rapidly and thus can provide benefits to the local Iraqi population.

What are some examples of these programs?

Well, one example is the [U.S] ambassador [Zalmay Khalilzad]'s initiative: A new supplemental that's pending before Congress right now would provide over $3 billion in aid to Iraq, which would be on sustainment [of infrastructure] and capacity-building. What that means is sustaining what the United States has provided to date, and second, capacity-building, or ensuring that Iraqis are capable of managing what it is we provide because it is new technology in many cases and it needs to be tended to. There's not a history, certainly not in recent history in Iraq, of effective maintenance. As a matter of fact, operations in maintenance spending always received short shrift during Saddam's era, and that is why the state of the infrastructure was severely decayed, much more so than was prognosticated.

So if I understand correctly, the ambassador wants to shift more decision-making on reconstruction projects to locals?

To something called the Provincial Reconstruction Development Council (PRDC).

Are these the same as provincial reconstruction teams (PRTs)?

No, the PRTs are coalition teams supporting and building capacity within the Provincial Reconstruction Development Council. The councils themselves are Iraqi-led, Iraqi-populated, and they make decisions for Iraqis. PRTs are coalition-managed and they build capacity within the PRDCs to get the projects done and the government supported.

The PRTs have a successful record in places like Afghanistan, correct?

Ambassador Khalilzad brought the idea with him from Afghanistan, and is now rapidly and effectively standing it up. This funding that's coming in [an estimated $400 million from the supplemental requested in the White House's reconstruction budget for Iraq] will significantly energize the PRT program and thus energize the PRDCs.

If you're handing more power and decision-making capacity over to locals, how do you make sure there's proper oversight? Your report, after all, mentions the high amount of corruption at the local level.

One of the key issues identified in the report is the need to attack corruption in Iraq, to fight what I call the "second insurgency." The fact is there is significant corruption in the oil and defense ministries, and there has been some in the ministry of interior. That means that the Iraqis have a significant challenge in front of them. For their democracy to succeed, they must make progress in pushing back these corrupt practices, and holding government officials who commit corruption accountable. And that means prosecuting them and putting them in prison.

Does the corruption you mentioned go up to the actual ministers of oil, defense, and interior, or is it just their underlings?

I can't go into the details of who the specific wrongdoers are, and I don't want to. But I will say that I met with the commissioner on public integrity yesterday [April 26] for three hours discussing this issue. He's got 950 cases going—investigations. There are sixty cases in front of the central criminal court now. But I will say the commissioner, in my judgment, is committed to fighting corruption in Iraq, and the United States and the international community, the donor nations should support those institutions that are in Iraq designed to fight corruption. And they are the Commission on Public Integrity, the Board of Supreme Audit, and the inspectors general in the ministries.

Are these the same commissions investigating corruption of non-Iraqi contractors like Philip Bloom? And is Bloom's case just the tip of the iceberg, or are we looking at more guilty pleas in the months ahead?

I was talking about what Iraqis must do to prosecute Iraqis, as opposed to what we do, and that is prosecute the few Americans over there who have taken advantage of an occasionally chaotic situation to enrich themselves illegally. And Philip Bloom and Robert Stein [an American contractor and former Coalition Provisional Authority official who pleaded guilty earlier this year to charges of conspiracy, bribery and money laundering] are facing over thirty years respectively in prison for their wrongful conducts involving the criminal use and application of over $8 million. That's our biggest case, certainly to date, and there are other cases to follow. And I really can't go into the details of the other cases because of their sensitivity.

In addition to corruption, we often hear about security concerns and bureaucracy. Of those three, which is the biggest setback to reconstruction?

Security by far. It's incomparably more problematic than either corruption or bureaucratic red tape.

And these are insurgents that are disrupting pipelines and projects?

I say insurgents and criminal activity. There's a mix, certainly, in Iraq. There's sabotage and then simply anti-United States insurgencies. The criminal element should not be underestimated over there. There are a lot of Iraqis who are simply taking advantage of the chaos as well, engaging in criminal conduct.

The New York Times had a recent front-page piece suggesting that a lot is blamed on sabotage and poor security, but, in fact, that poor decision-making and poor execution are bigger factors. Is that the case?

Well, there are two projects we have looked at that demonstrate what might be called poor management. That's the Al Fatah [oil] pipeline project in central Iraq, and then the Parsons Corporation [a U.S.-based engineering and construction company given roughly $2 billion in reconstruction contracts in Iraq] primary healthcare center contract—the clinics that we are looking at in this report. We have a detailed audit in this report that highlights the fact that over $180 million has been spent on that contract that was to construct 142 clinics, and only six are complete.

What explains this so-called reconstruction gap?

Well, there's blame allocable both to government oversight and contractor underperformance. The contractor clearly fell short of goals [to which] they perhaps should have been held more accountable along the way.

In general, is security on the ground improving? And with the expected drawdown of U.S. forces there, doesn't that open the door to more security breaches?

I can't really talk about troop-level decisions. What I can say is that we are focused in this report on the need to improve infrastructure security. Iraq gets roughly 95 percent of its income from oil and gas sales and refined-product sales. And the oil and gas infrastructure not only is decayed, but it's also been subject to repeated attacks over the past two years. And those attacks have diminished production and exports. And indeed exports are down to almost nil in the north because of attacks earlier this year. My concern is that oil and gas critical nodes be adequately secured by Iraqis so that those production levels can be pushed back up and those export levels will increase, and thus national revenue will achieve its potential.

When will oil revenues be actually able to cover reconstruction costs, as was originally envisioned before the war?

Well, I would say it's going to have to cover the operations of the Iraqi government and its national infrastructure because U.S. funding is going down. International funding—which would be primarily in the form of loans—going forward is certainly not of the magnitude [of] the very generous grant support the United States provided to the Iraq relief or reconstruction fund. Now, what that means is that they're going to be serious about cutting down on smuggling; smuggling is a big problem because of the subsidy issue [the Iraqi government spends roughly $5 billion in oil subsidies per year to keep fuel affordable, but these artificially low prices, relative to Iraq's neighbors, have encouraged smuggling]. And the subsidy issue creates an incentive to smuggle oil and gas products out. The new government will have to address that square on and fix it.

Talk more about some of the reconstruction gaps, delays and other setbacks we see in the news. A Senate Foreign Relations Committee report said that no large-scale U.S.-funded construction in Iraq has met its scheduled budget, but then the same article points to this $592 million [U.S.] embassy that went up on time. Why have other constructions, particularly those that affect everyday Iraqis, not been finished on time? Is it poor management or underperformance?

No, security's been the driving issue, and security has required over 200 reprogrammings, the changing focus from very large-scale projects to more localized projects. There have been fundamental evolutions as the United States has recognized what works and doesn't work in Iraq reconstruction. It's important the United States succeed now, and that's what this new funding [the $3 billion requested by Khalilzad for reconstruction] will help the United States do. It will really energize the new Iraqi government by pointing the way to the next phase of Iraq's relief and reconstruction, which must be born financially by Iraq and must be supported, more significantly, by non-U.S. donor nations.

How do you get more international donors to open their wallets?

The [October 2003] Madrid conference put $13 billion on the table a little over $3 billion of which has come forward to date. It's time for the other $10 billion to move in. It's also time for the World Bank to resume its important role in [the field in] Iraq. It manages the trust fund for multilateral donors, manages its own loan programs, and it has advisory expertise that can support ministries. This is what the World Bank does: engages with countries in need of relief and reconstruction and helps them down that path. I think it's hard to underemphasize the important role the World Bank must play now in Iraq.

It seems main staples like heating oil, water, and electricity are still not getting to everyday Iraqis three years on. Has progress been made in those three areas?

Well, the demand for electricity greatly outstrips the supply right now. No getting around that. And there are thousands of private generators being run sort of on the side to meet that demand. You go around Baghdad and you see generators everywhere that are supplementing the electricity supply, simply because the supply is not there. That's a long-term project: building capacity. The United States has put over 2,500 new or refurbished megawatts onto the grid, and that's a good start, but as this SIGIR report says, that the United States' investment, as substantial as it is, is still just a start—a substantial start—for Iraq toward a fully reconstructed infrastructure.

What about the controversy swirling around no-bid contracts handed out with no oversight to companies like Halliburton? Is it fair to say these companies are not performing up to expectations?

There were pre-war, no-bid contracts, but that's not the issue today. The [U.S.-run] Joint Contracting Command in Iraq completes every contract over there and has for a long time. To the extent that that ever was an issue, we're well past that point. As to contracts and performance, yes, there has been underperformance, and I've alluded to it regarding Parsons on the primary healthcare centers. That's simply a significant shortfall by a contractor and I think that [U.S.-based Kellogg, Brown & Root] certainly unperformed at the Al Fatah [pipeline] crossing. There certainly have been failures on the part of contractors in Iraq. Let me also say there have been great sacrifices and successes. [U.S.-based] Flour-AMEC did a very good job at building a power plant in south central Iraq. They're also building a very good water-treatment plant up in inner Erbil and one in Nasiriyah. Again, as I said at the beginning, the story of Iraq reconstruction is certainly a mixed story, successes and failures coming together.

Are you generally optimistic on U.S. reconstruction efforts?

I think Iraq is going to have to close the reconstruction gap with the support of international donors, and by that I mean filling in the gaps in the infrastructure that are still open. There needs to be more electricity supply, more clean water supply, higher oil production, more clinics—there are places where there's just great need in Iraq. But I am optimistic for these reasons: One, there's no getting around the fact that Iraq has the second-largest oil reserves in the world and that should spell eventual prosperity for that economy if they can get control of the corruption. Second, it's an enormously arable country. There's so much arable land there that they ought to be the breadbasket for the Middle East. And then third, it appears the turning point has been reached for the establishment of the new government, and stability, as the World Bank has repeatedly said, is an essential precondition for successful development. And that new government, once formed, will begin to instill stability and thus effective and more rapid development will ensue.

How far off is the United States, in your estimate, from handing reconstruction duties entirely over to Iraqis?

This is the "year of the transition" in Iraq reconstruction—that's how my report starts. We said that in the last report, we echo it again in this report. This is about sustainment and capacity-building: sustaining what's been built, building capacity with the Iraqis to keep it going, and to engage the world community in supporting this new democracy.

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